“Time in the market is better than timing the market. Just start saving/investing now. Automate it. Pay yourself first. Your future self will thank you for it.”

What does this mean for you and me?

If you invested your money 10 years ago, you have already won. There’s no need to be greedy at all. Whatever happens to the market in the next 6 months to 1 year is not your battle anymore. Focus on the long-term possibility instead.

Over the years these three things remain the wisest advice I’ve ever read when it comes to the stock market.

What if I tell you, you can actually do that by investing in the stock market.

How?

You become part-owner of the company you invested with. And you don’t even need to be a millionaire to buy and own shares of some of the biggest company in the country.

Take for example Jollibee (JFC), the biggest fast food chain in the Philippines.

Franchising a Jollibee branch will take a million pesos, even more of money as capital. But, if you own a stock, at Php 286/share and minimum of 10 shares investment, you only need Php 2860 to be a co-owner.

And not only that.

Buying JFC shares entitles you to be part-owner of other fast-food chains in the Jollibee umbrella such as Red Ribbon, Greenwich, Chowking and Mang Inasal. These along with all the branches they have in the present and in the future.

Isn’t that amazing.

Now, how do you make money owning stocks?

People make money investing in the Philippine stock market in two ways.

1. Capital appreciation

An increase in the value of your investments due to increase in the potential value and demand of shares in the company you invested.

Example :

Let’s say in 2013 you bought 100 shares of Jollibee (JFC) at 107pesos/share. The total value of your investment is 10700pesos.

At present 2017 Jollibee stocks is at whooping 189pesos/share. Meaning you make 18900pesos out the 100 shares you own.

That is 8200pesos earned within 4 years of passive investing. Without you actively participating or working for it.

Example of Capital Appreciation.

The very first investment I made in my First Metro Sec account was 100 shares of Puregold at Php 44 per share. Today the stock price for Puregold is already Php 51 per share. This means my Php 4400 before is now Php 5100.

2. Dividends

A payout issued by some profitable companies to its shareholders/investors that reflects the company’s respective earning. This can be by additional cash to the shareholder’s accounts and/or additional shares.

Example:

Given the example above let’s say Jollibee also gave a 1peso/share dividends to its shareholders every three months from 2013 to 2017.

This means above from the 8200pesos you earned from the capital appreciation of the money you invested, you also gained a dividend of 1600pesos.

Example of Dividends.

I received a number of dividend payments at the start of 2018. Among the stocks that paid good dividends were Cosco, Metrobank and ABS-CBN.

Here’s the key take away:

Invest your money on good companies in the stock market, preferably the blue chip stocks, and all that’s left for you to do is wait and watch your money grow.

Reason #2. Investing in the stock market offers the most potential for growth.

History has proven how investing in quality stocks over a period of 10 to 20 years can provide greater returns than parking your money in a bank.

Take a good look at PSEi. PSEi is composed of the 30 “biggest” publicly listed companies in the Philippines based on PSE’s standard.

(1) The skills of the investor when it comes to timing – this affects capital appreciation

Remember my Puregold investment? Buying at Php 44 per share turned out to be a profitable decision for me.

Now that the market is down, I’m slowly buying shares from my losing stocks. Why? Because I want to rebalance my loss.

Here’s an example.

So when the market is up again I will have better returns.

Of course never ever follow this advice sa mga patapon na stocks. I only do this rebalancing thing on stocks that I still believe have great potential and the intrinsic value is still on point. Like Metrobank.

(2) The time horizon of the investment

Investment horizon is the total length of timethat an investor expects to hold a security or a portfolio. Time horizons play a crucial part in every investment especially in the stock market.

Buying blue chip stocks are good call for long-term investments. These blue chip stocks are from companies that had (and continuously) withstand the test of time such as Ayala, SM Holdings and Meralco.

Investing in IPOs or new companies listed in the stock market are for short-term investments. If you buy stock in small, new companies, you could lose it all. Or the company could turn out to be a success.

This happens with Cemex Holdings Philippines. It’s initial public offering became hyped that it grew to Php 10.75. Today, CHP is valued at Php 3.57 and continues to drop.

A contrary to Wilcon with an IPO of Php 5 per share in 2017 and became Php 11 per share now.

You should also take note of time horizon whenever you are setting financial goals.

For example a downpayment for a home could take up to three to five years of investment while a major purchase only takes a year. Retirement, on the other hand could be up to 20 years.

You don’t need to invest all your money in the stock market. Put some on an ETF, Index Fund or PERA, considered as the best retirement accounts in the Philippines. For major purchase you can definitely try companies that are still undervalued.

(3) The dividend rate of the stock (if there’s any)

A dividend is a cash payment from a company’s earnings.

But, not all stocks or companies pay dividend to its investors.

I’ve been investing directly in the Philippine stock market, I am now able to take advantage of dividends.

Last year, I got paid for both my Cosco and Puregoldinvestments. It was such a good news and a proof that making your money work for you is possible.

Now, not every stock you invest with will pay you dividends. Some companies will choose to reinvest in the company whatever earnings they have into further growth.

There are two reasons why companies choose to issue dividends. According to Investopedia,

Many investors like the steady income associated with dividends, so they will be more likely to buy that company’s stock.

Investors also see a dividend payment as a sign of a company’s strength and a sign that management has positive expectations for future earnings, which again makes the stock more attractive. A greater demand for a company’s stock will increase its price.

In May last year, Entrepreneur.com.ph published an article on the 5 High-Dividend Paying Stocks. The list includes Leisure and Resorts World (LRP), San Miguel Corporation (SMC2B), First Gen Corporation (FGENF), Phoenix Petroleum Philippines (PNX3A) and Megawide Construction (MWP).

(4) The specific strategy employed (as a way of maximizing the three above)

You see, I’ve been investing since I was 19 and to be honest all I know is I am saving up money for my(future)self.

This ultimately means, I invest whatever money I have in excess to reach financial independence and early retirement in my early 40s.

Strategies to use when it comes to investment could be vast.

It’s like me telling you my skincare routine – it works for me but it doesn’t mean it will work for you too.

Also there is no promise that the strategy I use today will be the same strategy I use forever.

There are three common types of people in the stock market:

1. Investors. You pick and hold a particular stock for a number of years or until you decide to reap your returns. Investors’ focus is to buy stocks that can bring great earnings in the future at the lowest possible price.

2. Traders. You buy and sell stocks within a short period of time, often holding a particular stock on less than the trading day.

3. Index Fund Investors. You invest on an index with the aim of mimicking the market. This index is composed of a group of stocks on a specific field that offers passive returns.

Reason #3. Investing in the stock market can beat inflation

Inflation is a state where the prices are rising and value of purchasing power of money is decreasing.

So, for example, if a 3-in-1 coffee costs Php7 today, it’s highly possible that it could cost Php 10 one year from today. So maybe your Php 100 can buy 14 3-in-1 coffee but next year, that same Php 100 can only buy 10 sachets.

Inflation happens without us even realizing.

To mitigate the effect of inflation in your current money, you can invest some on the stock market instead.

Stock market is the most accessible investment vehicle that could equal or even beat inflation

Buying stocks from good companies can give you a possible return of 10-20%, way higher

If you buy stocks of decent companies, you can easily get a return of between 10-25% depending on how good the stock is and how much time you invested in choosing the stock.

Investing in stocks allows you to take advantage of compound interest, the eighth wonder of the world.

The longer your money stay invested in stocks, the more it will generate interest over interest.

What earning compound interest means for you?

You can reach your financial goals faster

Your financial goals like buying a home, starting your own business can be achieved faster because your money is earning higher interest rate than parking in the bank.

You Receive Higher Return of Investment

Compared to normal savings account and other traditional investment vehicles, you have better chance in building wealth over time through stock market.

You generate passive income

Make your money work for you and not against you by putting it on the stock market! As long as you stay invested, your money will be earning interest even while you are asleep.

Final Notes from SavingsPinay

With what’s happening in the stock market, here are some winning strategies I want you to apply to mitigate the risks.

1. Invest only in stocks that you know

Choosing which stock to purchase can be very confusing. So I personally suggest you only invest in stocks familiar to you. What commodities do you always use? What fast food giants do you often visit and dine-in? What services do you frequently avail?

2. Invest in giants

Make your stock portfolio more stable by investing in giants. Although the return is not as high, you be assured that there is a return for your investment!

Giants such as any of the companies in PSEi will make your investment portfolio strong. They may be expensive but they are most likely worth it to own.

3. Invest in yourself

You know the drill in personal finance – the more you know, the better. If there is a chance for free seminars on stock analysis, join them! Your broker mostly host seminars on a weekly/monthly basis which will enable you to make sound decision on your stock moves.

4. Invest in accordance to your goals

In every investment you do define your why. And make sure that you follow your why. This is important so you avoid getting easily swayed by your emotions in case the market goes down or you see most of your investments hitting rock bottom.

Your objectives will also clearly define who you are as an investor. Whether you are conservative – can’t withstand risk, balanced – can moderately withstand risk or dynamic – can withstand risk no matter how high it can be.

Because you know who you are as an investor it is easier for you to determine which investment vehicle is right for you.

5. Invest with your spare money

Before you even begin investing in the stock market, I plead you to do two things:

It is important to only invest with your spare money because investing in stocks comes with certain risks. If you invest your emergency fund or your savings and your investment became negative you will be forced to sell at a loss.

What are your thoughts about investing in the stock market?

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Izza of SavingsPinay promotes financial literacy for the young and young at heart by providing insights and tips on budgeting, saving, investing and online entrepreneurship. Aside from this blog she also writes at www.izzaglinofull.com, a beauty and lifestyle blog for frugal Pinays and manages, www.izzagevents.com, a wedding and event business since 2011. For inquiries, topic suggestions or future collaborations email her atizza@savingspinay.ph

ABOUT THIS BLOG

SavingsPinay is a personal finance blog of a common Pinay. This blog promotes financial literacy for the young and young at heart by providing insights and tips on budgeting, saving, investing and online entrepreneurship. Set to be the #1 Personal Finance Blog in the Philippines, SavingsPinay guarantees quality posts every Monday, Wednesday, Friday and Saturday!